5 Growth Stocks In MedTech Set To Scale Higher In 2018
Zacks Investment Research | Mar 11, 2018 10:52PM ET
The U.S. investment market has scaled new highs on the latest Republican tax cuts and robust economic growth at home and abroad.
In fact, the MedTech sector is looking forward to the latest decision of the Senate to postpone an industry-wide excise tax (Medical Device’ tax) by another two years. The bill will also delay the Cadillac tax (a 40% tax on employer insurance), until 2022. The Medical Device tax imposes 2.3% excise tax on MedTech manufacturers, reducing the research and development (R&D) prospects.
Not just abatement of the taxes, the MedTech fraternity has also been riding high on the ongoing merger and acquisition (M&A) trends in the space. In fact various reports suggest that M&A has been the key catalyst of the U.S. healthcare space of late. Per data provided by BioSpectrum Asia, M&A activity in the MedTech space surged 50% in 2017, increasing the value of aggregate M&A to more than $200 billion.
M&A in Focus
We believe the M&A strategies will reduce pricing pressure and competition in the MedTech space. Further, the companies with a strong acquisition policy will expand customer base faster, moderate leverage and enhance cash flow.
Glancing through the major acquisitions of the recent past, Becton, Dickinson and Company’s acquisition of C. R. Bard, and JOHNSON & JOHNSON’s buyout of Actelion deserve a mention.
Further, health insurers are trying to collaborate with pharmacy benefit managers to streamline and cut costs in the drug supply chain. In this regard, the latest buyout of Express Scripts by Cigna (NYSE:CI), which follows just three months after drug chain and pharmacy giant CVS Health Corp (NYSE:CVS) announced plans to acquire the nation's third-largest health insurer Aetna (NYSE:AET), is important.
Combined with the postponement of the taxes and a solid M&A policy, the Medtech sector is poised to grow in the coming quarters.
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